06/27/2007 12:12 pm ET | Updated May 25, 2011

A Pajama Party in Tulsa

Airline travel's miserable these days. "Summer Flying Turns Ugly," said The Wall Street Journal. So I'd thought I'd bring you some good news from the belly of the airline business.

At FORTUNE's Leadership Forum today, I interviewed Carmine J. Romano, a vice president who oversees airline maintenance for American Airlines, and Dennis Burchette, international vice president of the Transport Workers Unions. Management and labor guys in the airline business don't usual get along. These two are pals. Their willingness to work together has saved the company many millions of dollars -- no exaggeration -- and saved the union hundreds of jobs. It's a great story.

Carmine's been with AA for 39 years, Dennis for 21. Both started out as aircraft mechanics. Maybe that helped. Or maybe they were forced to work together under duress -- when Dennis was elected president of his local in 2004, the airline had barely avoided bankruptcy after getting concessions from its workers. His union members were bitter. Carmine felt unending pressure from his bosses to cut costs.

Fortunately, a new CEO, Gerald Arpey, came to American right about then and wondered out loud why his senior execs and the heads of AA's unions couldn't find ways to work together.

Things began badly. At an early meeting, someone from the airline asked Dennis and his union people if they would talk about their feelings. "How do you think we feel," Dennis shot back. "You just took our money out of our wallets." Carmine, meanwhile, had been trying to shove Six Sigma management processes down the throats of his workers. "I was a command and control guy," he said. He commanded but no one would be controlled.

Once Carmine and Dennis decided to start talking and listening and stop arguing, they were amazed by what they were able to do. A "joint leadership committee" of workers and managers was formed to look at all the processes in the plant. They operated by consensus -- no change could be made unless everyone agreed. They hired a consulting firm called the Overland Resource Group, which says on its website that ...

Unions and Companies are best served by collaboration. Organized labor has a clear mission -- get jobs for their members, secure those jobs, negotiate for the best remuneration feasible, assure both a safe workplace and that their members are treated with dignity. In today's market companies are focused on being profitable. Contrary to common belief, that is a perfect marriage. Everything unions want for their members is more available when the companies which employ them are profitable. Conversely, very few forces can negatively or positively impact the profitability of a company more surely than its labor unions.

It sounds good, doesn't it? But to promote trust, AA gave both the managers in Tulsa and the union the right to get rid of the consultants if they were unhappy. None did. Lots of good will was built up during a three-day retreat off site -- which Dennis described with a laugh as "a pajama party." That's where the company and the union came up with a shared mission statement, and the company agreed to share power with the workers.

One result: Before then, it took about 21 days and 700 people to overhaul and maintain a typical airfract (an MD-80, as I recall) at the Tulsa facility. Today, after improvements in operations, the breakdown of silos, better spirit and the like, it takes about 13 days and 400 people.

And here's the real payoff: AA now has a new business, maintaining engines for other carriers, including some from overseas. The company did $50 million of business last year and hopes to get to $185 million before long. I didn't know until today but many other U.S. airlines outsource their aircraft and engine maintenance, flying planes to suppliers in Asia to save money. Let's hope the Chinese (if it is the Chinese) are more careful with our planes than with our pet food, tires, Thomas the Tank engine toys, etc.

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